The Counter-productive Isolation of Proud and Hungry Sanaa

Our Arabian Peninsula Senior Analyst April Longley Alley finds pride, resilience and an eagerness to end the conflict during field research and many conversations in Sanaa, Yemen’s capital. She concludes that isolating one side or making the famine and suffering worse will only prolong the war.

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SANAA, Yemen – One of the most frustrating parts of working on Yemen’s conflicts is how hard it is to visit the country. I have spent five months lining up approvals and security protocols for my trip. Now, at last, I am boarding a UN flight from Amman to Sanaa. It is my first journey back since I left four days before a Saudi-led coalition, supported by the U.S. and UK, began a bombing campaign in March 2015. This operation aims to restore the government of Abed Rabbo Mansour Hadi, which was toppled by Huthi rebels aligned with the former President, Ali Abdullah Saleh.

War damage is evident as we descend to land. Sanaa’s civilian and military airports are side by side and the military component has been almost entirely destroyed. We pass blasted hulks of helicopters and warplanes and then wrecks of civilian airliners from Yemen’s former Arabia Felix carrier. We taxi to the shrapnel-shredded terminal building, which is completely deserted, a far cry from the bustling crossroads that I remember. Since peace talks broke down in August 2016, only humanitarian flights organised by the UN are making it to Sanaa each week. One lone bus pulls up to deposit a hand-full of passengers in the empty terminal. I on the other hand am greeted by a member of Ansar Allah (aka the Huthi movement) and a representative of the Ministry of Foreign Affairs in Sanaa, both there to ensure that there are no entry problems for the one visitor from America and an international non-governmental organisation on the flight.

Still a Vibrant City

As I drive into town, though, I am in for a surprise. I don’t initially see the human suffering I know is there. Superficially, the city seems in roughly the shape I left it in, crowded, noisy and full of life. There is a traffic jam in Tahrir (Freedom) Square – clearly petrol is making its way in. Sanaa’s famed tall, intricately decorated mud brick houses are mostly still standing and the old city is largely intact, albeit with more garbage in the streets and pictures of martyrs and Huthi slogans plastered everywhere. People are going about their daily lives: the streets seem vibrant, stores are open, and there is food on the shelves. My driver tells me that the city is more crowded than usual because it is absorbing the internally displaced from surrounding combat zones. Compared to other areas of the north, I am constantly reminded that Sanaa has suffered the least from Saudi-led coalition bombings and by the growing threat of famine. Areas like Hodeida, Saada and Hajja, I am told, are far worse.

The problem is not the availability of food – at least in Sanaa for now – but having the money to buy it.

There’s something else, too. I feel safe, even traveling in a regular taxi. It’s true that I’m wearing the black robe and traditional black women’s niqab face covering, meaning that nobody can see anything of me but my eyes. But there are remarkably few checkpoints in the city and little overt security presence on the streets. I go back to see a friend’s home where I used to live, and everything is still there, albeit covered in dust. There’s no sense from my conversations of widespread looting or lawlessness.

There is even some silver lining to the hardship. The reality of constant blackouts has inspired new innovations and many homes and businesses have gone green. There are more solar panels than I remember. The government can’t supply much electricity, or much of anything else, and this is forcing people to do what they do best and be creative.

As I get my bearings, though, I see the buildings that have been bombed, often flattened in the middle of a crowded urban setting. These are mostly government buildings or private houses belonging to Saleh, his family or officials in his party, the General People’s Congress (GPC). The most shocking gap in the urban landscape is the snarled metal frame of what was Sanaa’s largest gathering hall, which the Saudis say they mistakenly bombed on 8 October 2016, killing 140 people and wounding over 600 mourners at a funeral.

I visit the site several days into the trip to witness the damage first-hand. Faded pictures of those who lost their lives in the inferno that day line the gate. I see the picture of a friend and respected local leader, Abdul Qadir Hilal. He would have been one of the first I would have visited on this trip to learn of the prospects for a settlement. But he, and so many others I relied on for insights in the past, are either dead, living abroad or based in other parts of this divided country.

That the coalition is targeting the Huthi/Saleh alliance is little solace to the Yemenis I meet. Strikes on the homes of GPC officials in particular are often in densely populated neighbourhoods, making collateral damage inevitable. In each place, I hear about casualties: a next-door family of six being wiped out, a young girl killed, a mother burned to death. People speak of many “double taps”, when rescuers rush in to help after a first bombing, and then coalition planes drop a second wave of bombs, killing rescuers and anyone else who happens to be nearby. Not once do I hear of a high-ranking GPC or Huthi official being killed in these bombings.

During the six days I am in town there are no air raids. From time to time, I hear the far-away roar of reconnaissance planes. My Yemeni friends, now keenly aware of their presence, point them out to me. A few days after I leave, they bomb again, hitting, as they mostly do, the same military installations in the mountains around the city.

A Hidden Hunger

I see no lines of people queuing for food. Bakeries and restaurants are still open, and there are fruits and vegetables in the stands. But desperation lies beneath Sanaa’s bustling surface. Poverty has always been present in the city, but there are many more people than I remember picking through piles of rubbish, looking for something to eat or sell.

The problem is not the availability of food – at least in Sanaa for now – but having the money to buy it. After two years of war, the economy is collapsing and a crisis between Yemen’s warring factions over the Central Bank has contributed to a situation in which civil-servant salaries have not been paid consistently since August 2016. Everyone I spoke to soon broached the subject of economic difficulties: politicians, friends, guards, taxi drivers, hotel workers, and seemingly every chance acquaintance.

April Longley Alley meets with Mohammed al-Dailimi, Executive Director of the Rehabilitation Fund and Care of Handicapped Persons, in Sanaa, Yemen, on 24 April 2017.CRISISGROUP/April Longley Alley

Silent suffering is growing under the façade of normality. People talk of spending down their savings. Landlords say they are not collecting rent because renters cannot pay. People are depending ever more deeply on their personal networks, with money from relatives abroad being sent in via money transfer agencies.

Women are at an immediate disadvantage because local customs make it hard for them to go out and get help on their own. A friend tells me of a neighbour whose husband disappeared: she has no word of his fate, no income, no extended family and few options to feed six young children. In another home, I meet a family of 14 women and children in two rooms. They are frighteningly thin, just skin and bones. But they are proud people, and make no fuss about their clearly desperate needs.

Us and Them

A sense of proud resilience is probably what is underestimated most by the U.S.-backed, Saudi-led coalition. Even people who are not natural supporters of the alliance between the Huthis’ militia and former President Saleh feel a kind of solidarity as a result of the war, the isolation that has been imposed on them, and the wider damage inflicted by the bombing and the blockade. If people felt the targets were just Huthi fighters, they might feel differently; instead, the deaths of civilians, including women and children, and growing economic hardship make people feel that everyone is a target. Indeed, one of the strongest impressions of my stay is a seething anger at the way the war is destroying the lives of ordinary people.

The 'us versus them' mentality that pits Sanaa against Saudi Arabia is mirrored inside Yemen along a number of internal divides.

This is not to say that there is no frustration or anger directed at the Huthis, whom many Yemenis blame for triggering the violence and now for not being able to run an effective government. But most anger, even hatred, is directed toward Saudi Arabia, a country with which Yemenis have a long and complicated history of rivalry. Even though the Huthi/Saleh forces have only light weapons and completely lack air power, this gives rise to a stubborn resistance that can be summed up as: “if the choice is: ‘surrender or starve’ then we’ll fight instead”. One tribal sheikh proudly tells me that “the Yemenis will never be slaves of Saudi Arabia”. There is also widespread and growing hatred of the U.S. for its support of the war, which Yemenis find difficult to comprehend. As an American, probably the most frequent question I am asked is: “Why is the United States attacking us?”

The prospect of a Saudi-led invasion of the north’s most important port, Hodeida, is stoking anti-Saudi and anti-U.S. sentiment, as well as a sense of solidarity in Sanaa. An attack on the port is universally perceived as an attempt to squeeze the north economically in order to force the Huthi/Saleh coalition to surrender or agree to a settlement on less favourable terms. This is allowing Huthi/Saleh politicians to grandstand on the issue, trumpeting that they are ready to extract as much blood as possible in defence of Hodeida and to expand the war further into Saudi territory in retaliation.

The “us versus them” mentality that pits Sanaa against Saudi Arabia is mirrored inside Yemen along a number of internal divides. In Sanaa, I witness strong solidarity, despite differences, against what is viewed as “foreign aggression”. Yet in other parts of the country the war narrative is radically different. From my contacts in the former south Yemen, a separate state prior to 1990 where the desire for independence is still strong, I hear that the Huthi/Saleh front are external invaders and that the Saudi-led coalition is right to intervene militarily. In the northern governorate of Marib, a historically Sunni tribal area with significant hydrocarbon resources, tribes and politicians, many associated with the Huthis’ main ideological enemy, the Sunni Islamist party Islah, are aligned with Saudi Arabia and functioning independently of both Sanaa and the internationally recognised government of Hadi. Hadi himself is nominally based in Aden, but has far less support there than local separatist leaders. Currently the areas of Huthi/Saleh control mostly overlap with the northern/Zaydi highlands, with notable exceptions like the port of Hodeida, a reality that has effectively divided the country along sectarian lines.

In both Sanaa and Aden, Yemenis have the idea that the other place is terrible and chaotic, which further deepens the conceptual division of the country. I haven’t been to Aden recently so I can’t tell my friends in Sanaa much more about the reportedly higher rate of deadly incidents in the rival centre. In Sanaa, many people are convinced the situation is so bad in Aden that, whatever their problems, they are happy with what they feel is their own better security. “We’re not like the ‘liberated areas’” (areas nominally under Hadi government control), they like to say.

Huthi/Saleh supporters in Sanaa are quick to encourage me to meet with a wide range of people in the capital, Yemenis from all parts of the country and from a variety of different political parties. With the exception of Islah, whose leadership is either in prison or under close surveillance, I am able to do this. Yet I get the sense that this diversity and tolerance is under acute threat. While the Huthi/Saleh leadership wants to promote the idea of diversity still existing in the capital, they undermine this with their imprisonment campaign. At a meeting where I sit with a diverse group of party representatives and independent activists, a representative of the Huthis says there is respect for differing opinions in Sanaa. Some in the group laugh and then launch into examples of unlawful detention and harassment of journalists. It is refreshing to see that Yemenis are still willing to speak their minds, but clear that the space is shrinking.

Power in Sanaa

In Sanaa, the Huthis appear to have gained the upper hand over Saleh on military/security issues. Yet their capability on the battlefield is not matched by competence in governance, a dynamic that is reviving and increasing the popularity of Saleh and his GPC party.

Meeting the famed Yemeni leader is an unexpected highlight of the trip. As target number one for the coalition, I have not planned to risk a meeting with him. But word of a rare outside visitor has clearly spread and he drops by a place I am visiting. As we walk around a courtyard discussing the war, his energy is undiminished, clearly ambitious to put his GPC party back on top of Yemen if he can.

The Huthis themselves admit that governance is not their strong suit. In fact, they are running a police state, and make no excuse for it: “we are fighting a war”, one leader tells me. There is no functioning court system, no effective recourse to justice, and this results in egregious violations of human rights. If the Huthi/Saleh alliance perceives you as an enemy, you are in danger of going to jail. Islah’s ranks are being reduced by mass arrests. People just “disappear”, including Islah leader Mohammed Qahtan. Families often don’t know for sure if, why or where their relatives are being detained. The Bahais, a sect that broke off from the Muslim mainstream, are also being repressed. Only occasionally do you hear of cases where tribal or other personal affiliations with the Huthis enable the release of an individual. A commonly heard refrain from those who oppose the Huthis, including among Saleh’s GPC, is that the war is strengthening the Huthis and extending their political life, since no one can challenge them as long as they are leading the fight against the “external aggression”.

During my short visit, I see no overt sign in Sanaa of the Iranian support that some believe is critical to the Huthis’ resilience. The Huthis receive diplomatic and media support, as well as some military assistance from the Iranians, but the importance and scope of the latter is contested. As evidence of political support, the Iranian Embassy is one of the few diplomatic missions that have remained open. Yet from what I saw it was far from a hive of activity. It is surrounded by high concrete barriers following a car bombing in 2014 and is managed by an acting ambassador with a small staff.

It is hard to overstate the impact of this isolation of the Huthi/Saleh alliance, and how much of an echo chamber Sanaa has become as a result.

Conversations in Sanaa are likely to mock Iranian influence as much as Saudi Arabia. “Show us one dead Iranian revolutionary guard”, is a common refrain one hears in response to accusations from Gulf countries of strong Iranian support for the war. Huthi leaders maintain that they make decisions independently of Iranian advice, even if many in the movement admire Iran’s regional political role and share with the Iranian political establishment a deep hostility towards Wahhabism (a strict interpretation of the Hanbali school of religious jurisprudence in Sunni Islam that developed in Saudi Arabia in the mid-18th century).

Both Huthi and GPC supporters say that Iran is not following through on promised financial support for the Huthis, an outcome that frustrates the movement. One GPC member says that Iran “should support the Huthis [financially] or shut up … Iran talks a lot, but gives little”. All of this is not to say that many Yemenis in Sanaa, especially those critical of the Huthis, do not fear greater Iranian involvement as well as becoming even more deeply entangled in – and victims of – the Saudi-Iranian rivalry. They do. But, for what it is worth, the story one hears in Sanaa is very different from the one heard most often in the Gulf, the U.S. or the UK.

Since the peace talks broke down in August 2016, the GPC and the Huthis are uncomfortably cooperating in a national salvation government. Despite near-complete political isolation and a lack of resources, this government is trying to keep up appearances. The minister of foreign affairs still goes to work in his ministry, although most of the sprawling structure is abandoned. The system is in suspended animation and institutions are literally crumbling. Without pay there are few staff ready to work, nobody is maintaining buildings and weeds are growing out of the cracks.

There’s a deepening sense of isolation. The foreign minister, unrecognised internationally, is cut off, save from the diplomatic presence of Iran, Russia and a few others. The only other foreigners in town are almost all working with the UN.

I also meet the speaker of parliament, a member of Saleh’s GPC party. He seizes the opportunity of a rare visit by a foreigner to fill the hall with parliamentarians and members of the press. Like many in Sanaa, he is eager to get his messages out about the humanitarian cost of continuing the conflict, and the way the West is worsening Yemen’s divisions by taking sides and recognising the other party in the conflict as the “legitimate” government.

It is hard to overstate the impact of this isolation of the Huthi/Saleh alliance, and how much of an echo chamber Sanaa has become as a result. There is no doubt that this alliance has significant popular support in the city and other areas under its control. Yet with minimal UN or diplomatic contact, there are few bridges between the effective rulers of north Yemen and the outside world. The Huthis have reinforced their isolation by detaining foreigners, especially Americans, and both the Huthis and Saleh’s forces have at times refused to meet with and/or denied entry to UN negotiators.

April Longley Alley meets with the speaker of parliament Yahya Ali al-Raee in Sanaa, Yemen, on 22 April 2017.CRISISGROUP/April Longley Alley

This isolation is clearly militating against negotiation and compromise. The closure of Sanaa airport in particular is compounding the siege mentality. Everyone wanting to leave must organise perilous, day-long trips across the front lines to Aden, which is under the control of the internationally recognised government. The journey takes nearly twice as long as before the war, the traveller is subjected to military checkpoints and harassment, and none with a political profile can feel secure they will reach their destination. Northerners are no longer welcome in the south and several people I speak with in Sanaa have been harassed and/or detained in southern territory.

For all intents and purposes, the people of Sanaa are stranded and can’t leave unless they feel forced to take a real risk, whether it is for medical attention, for family reasons or to study. If there’s one thing everyone I meet would like to see, it is the reopening of the airport. But people aren’t necessarily wanting to escape. In fact, many are stranded outside and would like to return.

The Search for Peace

As the days fly by I am so much back in my element that I mix up the date of my departure. I try to prolong my stay but the complex bureaucracy makes this impossible. I don’t want to leave. I remember how the war forced me out before, and I’m anxious that it will again be much too long before I can come back.

My whirl of meetings and impressions make me conscious that Yemen’s social fabric has been stretched and frayed, but not torn completely. Communities are working together at the local level to feed those in need. The idea and desire for diversity of opinion is present in Sanaa, even if there is little pluralism for now. Women, too, are playing an increasingly important role, especially on the dangerous divide between the Huthis and Islah. Islah women, for instance, are doing the hard work of following up on cases of disappearances or jailings of Islah members. Because people trust the women more and fear them less, their involvement can ease tensions. Many average Yemenis are swimming against the strong tides of sectarianism and social fragmentation engulfing the country and the region.

Yemenis are pining for a path out of the war. It will be tricky to find a solution to the confusingly regionalised aspect of the conflict, which must satisfy both Saudi political and security concerns while not trampling Yemenis’ honour or their various red lines in politics or security. Saudi Arabia, like many Yemenis, is concerned that Iran is gaining a foothold in the country through the Huthis. They also worry about security on their border and likely want to have significant influence over any new government in Sanaa. The Huthi/Saleh bloc is sensitive to any solution that would be perceived as surrender to Saudi Arabia or the Hadi government. They must work with local constituencies that are seething with revenge toward their northern neighbour.

Then there is the separate but related issue of finding a compromise among Yemen’s competing power centres, a challenge that will need to take into account the country’s new reality of decentralisation and regional autonomy. While the challenges to negotiators are many, my conversations in Sanaa lead me to believe that at least some practical measures are possible. Both Huthi and GPC interlocutors discuss ways of finding a compromise to prevent the extension of the war to Hodeida, to find a solution for the payment of salaries nationally and to move forward with political talks. There is some political room to work with, in other words, but finding this space requires consistent and broader engagement with, not the isolation of, stakeholders on the ground, including in Sanaa.

As I head back out to the beaten-up, empty airport, I am sad that time is so short. Seeing the mix of suffering, isolation and defiance in Sanaa also makes me realise how much each side of Yemen’s tragedy needs to be explored effectively. Isolating one side or the other impedes diplomats or a conflict-prevention group like my own from helping bridge some of these differences. Perhaps the most poignant part is what happens after my plane touches down in Jordan: a stream of texts from my friends and interlocutors telling me – someone who has no decision-making powers – that my visit has “revived hope”.

Instruments of Pain (I): Conflict and Famine in Yemen

War is denying Yemenis food to eat. This special briefing, the first of four examining the famine threats there and in South Sudan, Nigeria and Somalia, urges the Saudi-led coalition not to assault Yemen’s most important port, Hodeida, and both sides to immediately resolve deadlock over the Central Bank.

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I. Overview

Yemenis are starving because of war. No natural disaster is responsible. No amount of humanitarian aid can solve the underlying problem. Without an immediate, significant course change, portions of the country, in the 21st century and under the watch of the Security Council, will likely tip into famine. The projected disaster is a direct consequence of decisions by all belligerents to weaponise the economy, coupled with indifference and at times a facilitating role played by the international community, including key members of the Security Council such as the U.S., UK and France.

Avoiding famine, if this is still possible, requires the Saudi Arabia-led coalition, supporting the government of President Abed Rabbo Mansour Hadi against Huthi rebels and fighters aligned with former President Ali Abdullah Saleh, to halt what promises to be a bloody battle for Yemen’s most important port, Hodeida. It also requires immediate action by both sides to put aside differences and enable central bank technocrats to address the liquidity problem, pay public-sector salaries nationally and regulate the riyal. For this to be sustainable, Yemenis need a ceasefire and a durable political settlement to have a chance at rebuilding the shattered economy.

The evolving hunger crisis has both a supply and demand side, with an underlying motif of combatants pursuing war by any means with little to no regard for the population. According to a prominent Yemeni entrepreneur, “the real story of the humanitarian crisis is that Huthi/Saleh forces and the corrupt people around President Hadi are all benefitting from the war economy while the people of Yemen suffer”.[fn]Crisis Group interview, March 2017.Hide Footnote

The evolving hunger crisis has both a supply and demand side, with an underlying motif of combatants pursuing war by any means with little to no regard for the population.

Saudi-led coalition allies repeatedly have hindered the movement of aid and commercial goods to the population. Huthi/Saleh violations are most egregious in the city of Taiz, where their fighters have enforced a full or partial blockade since 2015, with devastating humanitarian consequences. They routinely interfere with the work of humanitarians, at times demanding the diversion of aid to themselves or denying aid workers access to populations in need, revoking visas or even detaining them.[fn]Statement to the Security Council on Yemen, Under-Secretary-General for Humanitarian Affairs and Emergency Relief Coordinator, Stephen O’Brien, 31 October 2016. Crisis Group interviews, representatives of humanitarian organisations operating in Yemen, March 2017.Hide FootnoteThey heavily tax all imports into their areas in part to finance the war effort and also run a black market in fuel, enriching military elites while driving prices up for trans­port of vital commodities.[fn]If goods are moved from Aden to Sanaa, they are taxed twice, once in the port of Aden by the Ye­me­ni government and again when they enter Huthi/Saleh territory. Importers and businessmen confirm that neither Hodeida port nor Aden port is functioning properly, as corruption is rampant at each. On the roads, militias in both Huthi/Saleh and government-controlled areas charge fees for movement of goods. Crisis Group interviews, March, April 2017.Hide Footnote

The Saudi-led coalition has strangled the flow of commodities into the country’s largest and most important port, Hodeida, which is under Huthi/Saleh control. Yemen is over 90 per cent dependent on imports for staple commodities such as wheat and rice; the UN estimates that 80 per cent of all imports for the north currently pass through Hodeida.[fn]Yemen on the ‘brink of famine’ as more than one third of the population faces starvation, UN warns”, ABC News, 24 February 2017.Hide FootnoteUnder the cover of UN Security Council Resolution 2216 (April 2015), which called for an arms embargo against Huthi/Saleh forces, the Saudi-led coalition aggressively imposed a naval blockade for the first year of the war. Three months after their military intervention, only 15 per cent of pre-war imports were entering the country, prompting UN humanitarian agencies to issue initial famine warnings. Following bureaucratic delays on the part of the Security Council, the coalition and the Yemeni government, the problem was partially resolved in May 2016 through a UN Verification and Inspection Mechanism (UNVIM) that led to an easing of restrictions, but by then coalition airstrikes had already damaged the port’s throughput capacity, contributing to long queues and delays.[fn]“In Hindsight: The story of the UN Verification and Inspection Mechanism in Yemen”, Security Council Report, 1 September 2016. The major air damage was done already in August 2015.Hide Footnote

The situation is about to become much worse, as the coalition appears determined to break a military stalemate that has largely held since September 2015 by attempting to capture the Red Sea coast, including Hodeida. It says that taking the port is necessary to stem the flow of weapons to Huthi/Saleh fighters and to bring them to the bargaining table. This reasoning is questionable, since the Saudi-backed Hadi government, not the Huthi/Saleh bloc, officially rejected the latest peace initiative of the UN special envoy, and the coalition’s navy and the UNVIM already monitor, albeit not perfectly, the port.

If the city is attacked and the [Hodeida] port closed, it will become the most important choke point in what already is a massive hunger challenge.

In any case, the campaign’s humanitarian risks are clear. Unlike Aden and areas in the south, coalition forces would not be greeted as liberators, and Huthi/Saleh fighters have had ample time to prepare defensive positions. The battle would likely be protracted and could close and further damage this vital entrepôt. Even if the coalition is able to secure the city, it is far from clear it would have the will or capacity to ensure imports cross battle lines into Huthi/Saleh-controlled areas of the north, where the bulk of Yemen’s population resides. Indeed, there is widespread agreement among Yemenis that the Hadi government would use control of the port to further squeeze Huthi/Saleh-controlled areas economically in an attempt to break that alliance or engender an internal uprising against it, an outcome the Saudi-led coalition has long predicted.[fn]Crisis Group interviews, three prominent members of Saleh’s General People’s Congress Party, four Yemeni businessmen, Adeni journalist, Hadi government official, Yemeni analyst from Taiz, March 2017.Hide FootnoteThe costs of such a strategy would fall disproportionately on the civilian population, with Huthi/Saleh fighters being the last to starve.

Humanitarians argue that even at its reduced capacity, there is no alternative to using Hodeida in terms of location and infrastructure.[fn]“Statement on behalf of the Humanitarian Country Team in Yemen, on the Critical Importance to Maintain Al Hudaydah Port Open”, Relief Web, 4 April 2017.Hide FootnoteIf the city is attacked and the port closed, it will become the most important choke point in what already is a massive hunger challenge.

The more acute current problem, however, is on the demand side. Notwithstanding mounting challenges, food is still widely available in the markets, including Sanaa. Yet, Yemenis throughout the country increasingly are unable to purchase it. After two years of ground fighting and air bombardment, the economy is in tatters. Families and communities are approaching a breaking point, having sold their assets, spent their savings and exhausted extended networks of support. The situation is most severe for the more than three million internally displaced persons (IDPs) and residents of governorates like Hodeida, who were the poorest before the conflict. It also takes a particularly harsh toll on women and girls, who are typically the last to eat and in December 2016 made up 62 per cent of the four million people suffering from acute malnutrition.[fn]At the same time, child marriage is on the rise as parents use it to raise funds. Women are also carrying greater burdens; as many as 30 per cent of displaced women head their families. Fact-sheet, Gender Snapshot, Yemen, Care International, December 2016.Hide Footnote

A critical component of the purchasing power crisis is the inability of the central bank to consistently pay public-sector salaries since August 2016. This is a product of shrinking state finances, an acute liquidity crisis and the bank’s inability to move financial resources between areas controlled by conflict parties. The issue has become deeply politicised. Prior to President Hadi’s 19 September decision to move the central bank from Sanaa to Aden, there had been a tacit agreement between the warring sides to allow the institution to function relatively free of interference. Diplomats and economists widely agreed that the bank had remained largely impartial, facilitating the import of an increasingly limited list of basic commodities, protecting the value of the riyal and paying public-sector salaries nationally under increasingly difficult economic circumstances. But this did not last. Without revenues from hydrocarbons, which accounted for approximately half the government’s budget in 2014, or donor support, both solvency and immediate liquidity came under immense strain.[fn]Crisis Group Alert, “Central Bank Crisis Risks Famine in Yemen”, 29 September 2016.Hide Footnote

By moving the bank, the government argued, it could prevent the Huthi/Saleh bloc from using central bank funds for its war effort, while allowing the bank to dispense public-sector salaries nationally and stabilise the economy. The bank in Aden has printed much-needed currency to address the liquidity crisis (a move that was blocked by the Hadi government when the bank was in Sanaa); at least 160 billion Yemeni riyals (approximately $640 million) have been delivered to Aden as part of a 400-billion riyal ($1.6 billion) order from a printing company in Russia.[fn]Crisis Group interview, Yemeni bank technocrat and Western diplomat, April 2017.Hide FootnoteHowever, there is little transparency as to how the money has been disbursed. Moreover, since the relocation, some salaries have been paid in the south but far fewer in the north, and the banking system has all but collapsed, putting additional pressures on the supply side, as commodity importers can no longer access letters of credit.[fn]The total public sector salary bill based on 2014 (pre-war) lists is approximately 75 billion Yemeni riyals ($300 million) per month. As such, the recently delivered riyals are far short of what is needed to meet outstanding public salary payments since September 2016. The bank in Aden has reportedly paid public sector salaries for December 2016 in all areas under its control, but only a small fraction of salaries in Huthi/Saleh-controlled areas for that same month. It cites as reason for non-payment lack of access to reliable employment lists in these areas (which the government says the Huthis refuse to share, an accusation the Huthi/Saleh authorities deny), the difficulty and risks associated with transferring funds to Huthi/Saleh-controlled territories and the Huthis/Saleh authorities’ unwillingness to deposit local tax and import revenues into the central bank in Aden. Crisis Group interview, Yemeni bank technocrat, April 2017.Hide Footnote

More worrying yet, the government has not received a much-needed injection of foreign currency Hadi supporters expected would come from Gulf backers once the bank moved. The small amount of domestic revenue that is generated is not being deposited in central bank accounts, as the country’s various administrative centres are acting autonomously. Neither Huthi/Saleh-controlled territories nor Marib governorate, which is technically controlled by the Hadi government and is the main producer of oil and gas for Yemeni consumption, are making revenues available to the central bank in Aden. The Hadi government is also not depositing oil export revenues from the Masila basin in Hadramout, which came back online in August 2016, and is instead using an external account in Saudi Arabia with no oversight of expenditures.[fn]Crisis Group interviews, Western diplomat, Adeni businessman, April 2017. Letter from the Yemeni foreign ministry in Sanaa presented to the International Monetary Fund, World Bank, European Union, Russian Federation, and UN special envoy to Yemen, 31 March 2017, on file with Crisis Group. A bank technocrat argued that the reason for opening an external account in Saudi Arabia is technical. The central bank in Aden lacks a functioning SWIFT system (which it says will be resolved soon), the ability to interact with correspondent banks and access to its international accounts. The government thus opened the external account so it could mobilise money for expenditures related to, for example, the gradual resumption of some debt financing. Crisis Group interview, April 2017.Hide FootnoteIn the absence of access to foreign exchange, pumping additional riyals into the market would create inflationary pressures.

Each side blames the other for the economic disaster. The government says it cannot pay salaries in Huthi/Saleh-controlled territories until these remit tax and other import revenues to the bank in Aden (nationally these revenues accounted for around 30 per cent of pre-war government income). The Huthi/Saleh authorities accuse the government of trying to starve the north and refuse to recognise or share accounts with Aden. As the two sides bicker, Yemenis across the country are slowly starving.

III. What Is Needed

Addressing the looming famine is a complex challenge that requires immediate action to prevent a worsening of the situation and to deliver lifesaving assistance to those most in need. Yemenis are set to starve as a result of the financial consequences of the war, but this trend can still be arrested and even reversed if political actors choose to do so. The following steps are urgent:

The Saudi-led coalition should halt plans to invade the port of Hodeida.

The Huthi/Saleh authorities, the Yemeni government and the Saudi-led coalition should work with the UN envoy to reach a deal that allows technocrats in the central bank in Aden and Sanaa to devise a plan for the resumption of public-sector salaries nationally,
disbursement of social-welfare cash transfers to the poorest Yemenis and performance of basic banking functions free of political interference until a comprehensive political settlement is reached. This compromise should contain several elements, including:

cooperation between the central bank in Aden and the branch in Sanaa, where the majority of bank technocrats and infrastructure are still located;

agreement by the Huthi/Saleh forces and the government not to interfere with decisions made by technocrats in the central bank, nor to divert the bank’s injections of liquidity for other purposes;

commitment by all parties to ensure that hydrocarbon, customs and tax revenues are accurately deposited/reflected in the national central bank system; and that the central bank has access to at least some commercial banks and to foreign central banks where it has reserves on deposit. (Currently its accounts are blocked, in part as a result of uncertainties on the part of foreign central banks regarding the move from Sanaa to Aden and the appointment of a new bank management by President Hadi.)

agreement to pay public-sector salaries nationally based on 2014 pay lists (these exclude any additions made by the Huthi authorities since the February 2015 coup); and

Saudi Arabia and the United Arab Emirates should agree to help finance, along with the World Bank and other donors, the approximately $500 million needed to fund emergency cash transfers to the poorest Yemenis for one year using 2014 social-welfare lists.

To be successful, these stopgap measures ultimately must be supplemented and supported by a ceasefire and peace agreement that allow Yemenis the chance to rebuild state institutions and the economy. To this end:

the Huthi/Saleh authorities and the government should reengage immediately with the UN special envoy to secure a ceasefire and resumption of talks based on the UN envoy’s roadmap; and

the UN Security Council should take prompt action to rejuvenate the political track by passing a long-overdue new resolution under its mandatory Chapter VII authority demanding an immediate ceasefire, unfettered humanitarian access and a return to talks based on the existing UN roadmap, which requires compromises from both sides.